Loading...

How To Grow Your Restaurant Revenue 2x

Increasing revenue by 100%, or more, isn’t just about increasing customers. It’s about using a strategy that creates leverage, and leverage is about getting larger outcomes from the same inputs. We don’t just want more new customers, we want them to spend more, more often, and in larger groups. Follow our step by step guide to build your own strategy using your data. 

barista, coffee, pouring-5055060.jpg

Create your own strategy by following our simplified process and create a compounding effect on revenue and total value. 

Step 1.1

Increase the number of new customers per month

The first variable is the number of new customers your venue receives each month, defined as new customers who made a booking. Technically, they could have been a previous diner on another customer’s booking but this is their first time making a booking. Most online booking providers provide this info. It’s 1 of 4 data points you absolutely need to know.

Step 1.2

Average booking size

The average number of diners for each booking. Take the total lifetime covers, and divide by the total lifetime bookings to calculate the average table size. Revealing this number can also give some insights on how to configure the table plan and menu design.

FASHION OUTLET

Step 1.3

Average total visits

 This is the average number of times, each customer, makes a booking in their lifetime. This data may be a little tricky to find depending on your online booking software. Typically, you can find this by downloading all-time customer data, finding the column for ‘total visits’ and averaging that column. This is typically a number between 1 and 2. 

FASHION OUTLET

Step 1.4 Average spend per person 

The average amount of money that each customer spends per visit. Typically, this number is easy to obtain from your POS. 

What is a compounding effect? This is the snowball effect where seemingly small gains, get multiplied over and over into much larger gains.


Example: 100 x 3 x 2 x £75 = £45,000 add 10% increases to each variable 110 x 3.3 x 2.2 x 82.5 = £65,885 which is 46% larger, from 4 variables that increased by 10%. Small changes. Large outcomes. Compounding.

Step 2

Calculate customer lifetime value (CLV)

Step 3

Calculate monthly total value

Step 4

Set new targets

Step 5

Create KPIs The new target 

This is how much each new customer (defined as someone who makes a booking for the first time) is worth to your business in revenue. Average booking size x Average total visits x Average spend per person = CLV


Example: Average booking size is 3 pax, Average total visits is 2, Average spend is £75pp CLV = 3 x 2 x £75 = £450 Each customer, on average, is worth £450 in revenue in their lifetime.


Step 2

Calculate customer lifetime value (CLV)

Step 3

Calculate monthly total value

Step 4

Set new targets

Step 5

Create KPIs The new target 

This is the average, theoretical, maximum monthly revenue for your restaurant. CLV x number of new customers per month = Total Value


Example: Customer Lifetime Value = £450, Total new customers per month = 100 450 x 100 = £45,000 If, on average, this restaurant won 100 new customers each month, and didn’t change CLV, then this restaurant will reach a max monthly average revenue of £45k.

Step 2

Calculate customer lifetime value (CLV)

Step 3

Calculate monthly total value

Step 4

Set new targets

Step 5

Create KPIs The new target 

Set new targets Choose your revenue increase %


Example: Customer Lifetime Value = £450, Total new customers = 100 100 x 450 = £45,000 If we want to double (2X) the revenue, we double Total Value 45,000 x 2 = £90,000

Step 2

Calculate customer lifetime value (CLV)


Step 3

Calculate monthly total value

Step 4

Set new targets

Step 5

Create KPIs The new target 

Total Value (£90k) is made up of the same 4 variables we calculated from steps 1.1 - 1.4. Number of new customers per month x Average booking size x Average total visits x Average spend per person. We could just 2x any one of these variables to increase revenue by 2x. Or, you can increase a combination of these which is far easier to do.



Example: 100 x 3 x 2 x £75 = £45,000 Which we then doubled (to increase revenue by 2x) £45000 x 2 = £90,000 By increasing spend per head to £85 (was £75), average visits to 2.5 (was 2) and average booking size to 3.5 (was 3) then we can calculate how many new customers will be required. 90,000 ÷ 85 ÷ 2.5 ÷ 3.5 = 121

What is strategy

We define strategy as the decision making framework to increase Total Value. Total value is the product of new customers, average visits, average booking size and average spend per person. A restaurant’s revenue is entirely dependent on these 4 variables. A great strategy will enable restaurants to maximise each of the 4 variables, creating a compounding effect, leading to higher revenue (or Total Value).


Strategy Tips

For the vast majority of restaurants, the number of new customers from walk-by or word-of-mouth isn’t enough, and marketing is required. A high CLV will reduce the number of new customers required, driving down marketing costs A lower CLV will increase the requirement on new customers You can calculate the exact number of new customers required to hit target revenue You can estimate the marketing cost to acquire those customers (Total Marketing Spend / New Customers) x Target New Customers


HUNGRY TO GROW?

Let’s chat about how we can increase your revenue We help restaurants win more customers, who spend more, in larger groups, more frequently.